Binary Options Hedging Explained - Profit Slowly But Safe
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Let’s assume that our analysis points towards a bullish move so we invest $100 in a Call and in order to limit the risk, we invest some money in a Put…but a smaller amount. After all, our view is a bullish one and it is normal to invest more on the Call. This is the little trick proposed by the Geek and it’s a good one. In fact, without this twist, our hedge would just bring a loss. Ok, on the Put we only invest $50 so let’s do the math:
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First and foremost, the potential profit is limited by hedging. Here comes math again: If I am correct in my prediction, I can win $70 on an un-hedged trade but by hedging it I will only receive $27.5. That’s less than half so some guys might think it’s not worth it. I think this is the only major negative thing about hedging but it all comes down to your appetite for risk.
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